3. AI may expedite drug research and development to help support the needs of the aging population.
For the biopharma industry, AI is particularly promising in its opportunities for increasing efficiency, cost savings and success rates. One example is for exploring treatments for diseases occurring later in life, such as Alzheimer’s, that also contribute to healthcare spending. Developing a new drug is time- and capital-intensive, typically taking 10-15 years and more than $1 billion-$2.8 billion in capitalized cost. Furthermore, success rates are low: only about 10% of clinical candidates end up being approved.
“AI directly targets these inefficiencies through better target selection, more efficient molecule design, and smarter clinical trial execution, transforming development from a trial-and-error process into a more data-driven system that prioritizes higher-probability candidates,” Sean Laaman, Head of U.S. SMID Cap Biotech Research, recently noted. Estimated improvements include reductions in discovery timelines by ~3 years, early-stage R&D costs by ~25-60% and preclinical timelines by ~30-50%, as well as “early evidence of improved Phase 1-2 success rates.” While AI offers the potential for faster and cheaper drug development, it remains to be seen over the next several years whether it can also translate into success in Phase 2 and beyond, with implications for both biotech companies and investors.
If AI is able to improve timelines and the likelihood of success for a drug, it “has the potential to increase drug approvals by 10 to 40%,” U.S. Biopharma Analyst Terence Flynn said on Thoughts on the Market.
The industry is also facing changes as some $160 billion in revenue across U.S. large-cap biopharma companies is slated to go off patent prior to 2030, according to Morgan Stanley Research estimates, presenting new considerations for companies’ R&D, investor and growth strategies.
Across multiple sectors, including healthcare, “artificial intelligence investment continues to be a central theme shaping M&A activity,” John Collins and Tom Miles, Global Heads of M&A at Morgan Stanley, recently noted in a 1H2026 M&A report. “Acquirers are actively targeting AI-enabled capabilities to enhance productivity, accelerate innovation and build competitive advantage.” Healthcare M&A activity has featured biotech acquisitions by pharmaceutical companies as they aim to refill their drug pipelines. Healthcare transactions made up 11% of M&A volume in 1H2026, according to the report.